Is It High Noon Yet?Palm Computing (PALM) CFO Judy Bruner served the shots straight up to investors.
As the JPMorgan H&Q crowd lined up its questions, one by one, she didn't flinch. She pounded down an answer and told them to drink. Demand, you lily-livered varmints, tailed off uncharacteristically in March and took another step down in April.
Instead of building from the post-Christmas doldrums in January through the spring, April's sell-through was 20% lower than January's, according to PC Data. No, pardner, that wasn't solely in the U.S., but the softness hit the same time in Asia and Europe. The same time. So a 60% to 40% domestic/international sales balance won't help them. You wanna talk components? Let's talk about the single suppliers that hooked Palm into lots of component orders last year. Palm's upped that to several suppliers, but that won't black out the pain of the up to $200 million in inventory it's going to be staring at by the fourth quarter of 2001. Palm could slap investors with another write-off, but Bruner's not giving any details. Price slashing is in effect to get rid of some of the components that already have been built into finished products, but remember that a week or two in April didn't make things right.Yes, some of that comes from the delayed launches of the m500 and m505 handhelds, which Bruner says are on sale but not expected to ramp fully until next quarter at the earliest. Before then, consumers are sitting on their hands and not buying. "Clearly we have a lot of old products on the shelf," she said of Palm vendors. "They are anxious for new products at this time. Having those products helps existing products sell through as well -- the consumer wants to see all the alternatives before buying." I'm gonna need a double. So, is Palm going to survive? Jittery inquirers asked when she'd get nervous about her cash position. Bruner replied her two key issues were moving the component inventory -- which may or may not go into products -- and potentially selling or renegotiating the land for Palm's planned headquarters. Would she consider moving from the lower-margin hardware businesses to selling just the software (now 4% of Palm's revenues), without the component, consumer and vendor headaches? "That would be a high-margin business," she said, never breaking into a smile. And she answered probing questions off into the sunset.